Putting all your eggs in one basket is a recipe for disaster because you could be wrong. This also applies to the investment theme of artificial intelligence (AI). Although you have done a fantastic job if your only choice was Nvidia (NASDAQ:NVDA)it would be the opposite if your choice was C3.ai (NYSE:IA) (and if you use April 2023 as a starting point).
Diversification is an important part of a well-balanced portfolio today. If you want to dedicate part of your portfolio to AI, I urge you to consider a balanced approach, like investing in these three companies.
1. Semiconductor from Taiwan
AI has generated such high stock returns over the past year because of its widespread effects. There are hardware companies, AI tool providers, and companies that provide the software needed to implement AI in a business. I will choose one from each of these categories because I believe it offers a well-rounded AI investing approach.
Starting with the hardware side, I chose Taiwan Semiconductor (NYSE:TSM). While some may be shocked that I didn’t choose Nvidia, I think TSMC has a great investment thesis as well. Taiwan Semi is a chip foundry, which means it is an expert in manufacturing chips designed by others. With a client list that includes Nvidia, AMD, Appleand others, it is safe to say that TSMC is a (if not THE) the best dog in his sector.
AI is expected to have a significant impact on the business, as management estimates that AI-related products will see a compound annual growth (CAGR) of 50% over the next five years. By then, AI revenue is expected to make up at least 20% of its total revenue. Additionally, about a quarter of TSMC’s business is dedicated to manufacturing Apple products. The iPhone market has been poor of late, but Apple’s latest announcement that its Apple Intelligence features will only be available on newer models should boost sales. This is great news for TSMC and also a reason to buy the stock.
2. Alphabet
For AI tools, I chose Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL). Alphabet is primarily an advertising company, but integrating AI into this product line is why I’m investing. Although the rollout of its generative AI platform, Gemini, has been far from smooth, it is starting to become a respected force in its field. Gemini can be used for almost unlimited purposes, but has already been deployed to help customers create ads and summarize results for Google search users.
Alphabet also has a strong cloud computing offering with Google Cloud. Cloud computing is essential in AI because many companies do not have the financial resources to purchase a dedicated AI server. So they rent this computing power to a cloud computing provider like Google Cloud. Google Cloud is a top choice for companies working in AI and has captured 60% of funded generative AI startups and 90% of generative AI unicorns (private companies valued at more than billion dollars) as customers.
3. UiPath
Finally, for software, I chose UiPath (NYSE:PATH). UiPath shareholders have had a rocky ride recently with the departure of the CEO and lower immediate sales expectations, but the product it offers remains incredibly useful.
UiPath’s Robotic Process Automation (RPA) software allows its users to automate repetitive tasks, thereby improving productivity. Although it is not an AI technology per se, it integrates several facets of AI, including generative AI. This further increases the number of tasks the software can automate, broadening its use cases.
Additionally, UiPath integrates with Microsoft Copilot for Microsoft 365, which is a key partnership as it is one of the most commonly used business tools today. While many executives are pushing their companies to adopt practical AI use cases, UiPath’s product stands out from the rest.
While UiPath may have stumbled, the long-term outlook for the RPA industry is bright. Grand View Research predicts a compound annual growth rate of nearly 40% in the RPA sector by 2030. With UiPath being one of the leading names in this space, it is poised to capitalize on this boom.
Should you invest $1,000 in semiconductor manufacturing in Taiwan right now?
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Keithen Drury holds positions at Alphabet, Taiwan Semiconductor Manufacturing and UiPath. The Motley Fool holds positions and recommends Advanced Micro Devices, Alphabet, Apple, Microsoft, Nvidia, Taiwan Semiconductor Manufacturing and UiPath. The Motley Fool recommends C3.ai and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Mad Motley has a disclosure policy.
Forget a single AI stock: this trio could fuel the future of your portfolio was originally published by The Motley Fool
